The  Report  of  the  Superintendent  of  Insurance 


OF  THE  STATE  OF  NEW  YORK 


On  the  Triennial  Examination 


OF  THE 


Metropolitan  Life  Insurance  Company 


Summary  of  the  Report  of  the  Examiners 
The  Superintendent’s  Preface  in  Full 
The  Conclusions  of  the  Chief  Examiner 


New  York,  May,  1914 


"5 


Summary  of  the  Report. 


To  Our  Own  People: 

We  have  received  the  most  remarkable  report  ever  made 
upon  a life  insurance  company  by  a supervising  official. 

We  present  a brief  summary  and  we  print  in  full  the  Intro- 
duction by  the  Superintendent  of  Insurance,  and  the  “ Con- 
clusion’ ’ of  the  report  by  the  Chief  Examiner. 

The  occasion  was  the  regular  triennial  examination  required 
by  law.  We  were  very  proud  of  the  report  made  three  years 
ago  by  the  then  Superintendent  of  Insurance,  the  Hon.  William 
H.  Hotchkiss.  That  being  the  first  examination  made  of  the 
Metropolitan  Life  subsequent  to  the  passage  of  the  Armstrong 
laws,  it  went  back  practically  to  the  formation  of  the  Company. 
You  remember  that  it  was  very  favourable;  and  we  followed 
its  publication  by  a pamphlet  describing  in  detail  the  work 
and  progress  of  the  Company  for  the  preceding  twenty  years, 
which  covered  the  management  by  the  present  executive.  It 


was  a wonderful  exhibit. 


\ The  present  report,  following  an  examination  which  occupied 

a full  year,  covers  the  business  down  to  the  end  of  1912,  and 
makes  noteworthy  comparisons  with  the  figures  of  the  preceding 
report  which  ended  with  the  business  of  1909;  and  shows: 

In  the  intervening  three  years  the  Company  gained  in 
assets  about  120  millions  of  dollars  and  in  insurance  563  millions 
of  dollars,  of  which  over  300  millions  were  in  the  Ordinary 
Department.  It  added  nearly  two  and  a quarter  millions  of 
policies  in  force.  At  the  end  of  1912  the  assets  were  $397,913,- 
442.71;  the  insurance  in  force,  $2,604,966,102,  of  which  $910,- 
263,864  was  Ordinary  insurance  and  $1,694,702,238  Industrial 
insurance;  the  number  of  policies  in  force,  12,837,042.  (P.  3.) 

The  agency  force  was  11,834.  (P.  61-2.) 

Progress  in  other  respects  was  no  less  remarkable.  The 
lapse  ratio  on  new  business  of  Industrial  policies  decreased  six 
points,  or  nearly  15  per  cent.  The  examiners  set  forth  the 
percentages  since  1906  yearly  to  the  end  of  1912,  and  they  say: 
“ The  above  comparisons  show  a constant  and  consistent  improve - 


1 


) 

> 

■> 


ment  in  the  business  of  the  Company.  This  condition  indicates , 
first , an  improved  organization , and , second,  better  satisfied 
policy-holders.”  (P.  50.) 

“The  Company  now  issues  automatic  paid-up  insurance  for 
life.”  (P.  46.) 

As  to  claims:  “The  Company  receives  on  the  average  about 
550  claims  a day.  They  are  given  prompt  attention,  the 
majority  being  paid  the  day  proof  of  claim  is  received.”  The 
ratio  of  rejections  in  the  Industrial  Department  is  stated  to 
be  only  twenty-eight  hundredths  of  one  per  cent.!  (P.  52.) 

As  to  bonuses — that  is,  cash  grants  to  policy-holders  over 
and  above  the  provision  of  the  contracts — the  declarations  of 
each  year  for  19  years,  making  the  total  to  the  end  of  1912 
$35,367,293.32.  (P.  53.) 

Targe  decrease  of  cost  of  Industrial  insurance,  comparing 
1912  with  1902.  (P.  71.) 

Tow  net  cost  of  Industrial  insurance  after  long  persistence 
— after  25  years,  age  20  at  issue,  $14.10  per  $1,000;  age  30  at 
issue,  $18.05;  age  40  at  issue,  $24.67.  Alter  30  years  of  per- 
sistence, age  20  at  issue,  $11.72;  age  30  at  issue,  $15.01 ; age  40 
at  issue,  $20.51.  (P.  70.) 

Improvements  in  policy-contracts  in  all  Departments. 
These  are  set  forth  on  pp.  55-6. 

The  progress  and  extent  of  our  Welfare  work.  This  is 
described  on  pp.  57-61.  As  to  free  nursing  of  sick  Industrial 
policy-holders,  it  is  shown  that  in  April,  1913,  there  were 
“637  nursing  centers  from  which  were  covered  adjacent  towns 
to  the  number  of  792,  a total  of  1,429” ; that  in  1912  the  number 
of  visits  was  962,133  on  131,090  cases,  costing  $440,678.79 
in  districts  having  9,857,780  policies  in  force.  The  educational 
work  on  the  subject  of  health  and  hygiene  is  described;  the 
expenditures  on  the  Sanatorium  for  employees  set  forth;  the 
assets  of  the  Staff  Savings  Fund  (for  the  benefit  of  employees 
at  the  Home  Office  and  in  the  Field,  to  which  the  Company 
adds  about  50  per  cent,  of  the  savings  deposited)  are  shown 
to  have  been  doubled,  rising  from  $900,000  in  1909  to  $1,800,000 
in  1912. 

The  full  report  covers  over  80  printed  pages,  and  is,  of 
course,  too  long  for  general  circulation.  We  have  sent  a copy 
to  each  of  our  Superintendents,  to  every  Commissioner  of 
Insurance  and  to  the  various  insurance  newspapers.  For  the 
purposes  of  general  information  the  summary  above  will  suffice. 

2 


But  the  Examiners’  Report  as  printed  by  the  Department  is 
preceded  by  a very  remarkable  Preface,  written  by  the  Hon. 
William  Temple  Emmet,  the  Superintendent  of  Insurance 
for  the  period  covered  by  the  report.  It  is  brief  and  readable 
not  only  for  its  matter  but  its  form,  the  beautiful  English  style 
of  which  Mr.  Emmet  is  master.  We  cannot  comment  upon  it, 
for  we  could  not  do  so  without  using  extravagant  language. 
We  can  only  say  that  we  are  very,  very  proud  of  being  made 
the  subject  of  commendation  in  a paper  so  full  of  the  wisdom 
of  a statesman. 

We  append  to  this  Preface  the  “Conclusion”  of  the  Chief 
Examiner  in  his  report  to  his  Superintendent — an  Examiner 
who  is  always  chary  of  praise,  no  doubt  because  he  feels  that 
his  official  position  is  that  of  critic.  His  hearty  approbation  and 
the  absence  of  criticism  are,  we  believe,  almost  unprecedented 
and  therefore  the  more  grateful  to  us. 

These  two  papers  constitute  an  official  view  of  the  Metro- 
politan Life  Insurance  Company  which  the  administration 
prints  with  an  intense  gratification  which  I am  sure  you  will  all 
share. 


Vice-President. 


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Preface  to  the  Report 
by  the 

Hon.  William  Temple  Emmet,  Superintendent  of 
Insurance. 

1 

State  of  New  York. 

Insurance  Department. 
Albany,  N.  Y.,  March  23,  1914. 

When  the  Metropolitan  Life  Insurance  Company  was 
last  examined  by  this  department,  Mr.  William  H.  Hotchkiss, 
who  was  then  the  Superintendent  of  Insurance  of  New  York 
State,  prefaced  the  publication  of  his  report  of  examination  with, 
a memorandum  in  which  laudatory  references  were  made  to  the 
company’s  activities  in  several  of  its  departments.  Particular 
stress  was  laid  upon  the  desirability  of  encouraging  and  extend- 
ing in  this  country  the  writing  of  so-called  Industrial  insurance, 
for  which  the  Metropolitan  Life  Insurance  Company  is 
chiefly  noted.  This,  I suspect,  was  a question  which  had  been 
puzzling  Mr.  Hotchkiss  considerably,  as  it  had  the  Armstrong 
Committee  a few  years  before — the  question,  I mean,  of  whether 
private  enterprise  should  be  left  much  longer  in  control  of  the 
business  of  supplying  Industrial  insurance  to  the  masses  on  a 
large  scale.  My  predecessor’s  memorandum  shows  that,  what- 
ever his  original  doubts  may  have  been  on  this  point,  they  were 
dispelled  by  the  showing  which  the  Metropolitan  made  under 
an  examination  which  was  searching  in  the  extreme,  and  which 
I surmise  had  in  the  first  instance  been  undertaken  in  no  spirit 
of  pre-conceived  approval  of  the  company’s  methods  and  pur- 
poses. 

Upwards  of  three  years  have  passed  since  that  examination 
was  completed,  and  to-day,  notwithstanding  the  fact  that  the 
world  is  steadily  growing  more  radical  in  its  attitude  toward 
private  enterprise  as  a suitable  agency  for  the  accomplishment 
of  quasi-public  purposes,  this  question  of  permitting  organisms 
like  the  Metropolitan  Life  Insurance  Company — stock 
companies,  in  the  management  of  which,  however,  policy-holders 
have  certain  rights — to  continue  to  supply  the  great  social 
service  of  providing  Industrial  insurance  to  the  masses  un- 
challenged by  interference  or  competition  from  the  State 

5 


itself,  is  not  being  agitated  to  anything  like  the  extent  it  was 
three  years  ago.  In  other  fields,  the  socialistic  ideal  of  State 
control  has  during  this  time  been  making  large  headway,  while 
in  this  field  it  has  shown  a distinct  tendency  to  abate.  If 
this  means  anything,  it  means  that  in  the  field  of  Industrial 
insurance,  however  it  may  be  in  other  directions,  private 
enterprise  has  been  splendidly  justifying  itself  by  its  works. 
Upon  no  other  ground  is  it  possible  now  for  private  enterprise  in 
any  quasi-public  field  to  escape  the  challenge  of  the  new  spirit 
that  is  abroad  in  the  land. 

The  fact  is,  the  history  and  achievements  during  the  last  dec- 
ade of  the  Metropolitan  Life  Insurance  Company,  and  of 
one  or  two  other  of  our  large  life  insurance  companies,  present 
such  shining  examples  of  efficient  and  enlightened  business 
management — with  in  some  cases  a dash  of  statesmanship 
thrown  in — that  it  seems  to  me  to  be  quite  as  much  the  duty 
of  a supervisory  official,  when  an  appropriate  occasion  arises, 
to  comment  favorably  upon  such  cases  of  successful  public 
service  by  business  corporations  under  private  control,  as  it 
would  be  his  duty  under  present  conditions  to  administer  sharp 
criticism  if  the  tendency  had  been  in  the  other  direction.  In 
the  case  of  the  Metropolitan  Life,  the  responsibilities  of  the 
company’s  management  are  shared  by  its  comparatively  small 
number  of  stockholders  and  its  army  of  Ordinary  policy- 
holders— under  charter  provisions  designed  to  bring  about  this 
happy  union  in  a practicable  manner.  Precisely  what  the  basis 
of  this  partnership  between  stockholders  and  policy-holders  is 
need  not  be  gone  into  here.  It  is  no  part  of  the  work  of  the 
Insurance  Department  to  settle  questions  which  from  time  to 
time  arise  over  the  legal  meaning  of  charter  provisions.  That 
is  a function  reserved,  under  our  laws,  to  the  courts.  It  is 
with  the  results  achieved  under  such  a system  as  the  Metro- 
politan has,  rather  than  with  its  exact  legal  character,  that  we 
are  now  concerned.  I simply  call  attention,  therefore,  to  the 
interesting  fact  that  at  each  annual  election  of  directors  certain 
of  the  Ordinary  policy-holders  and  the  stockholders  of  this 
company  have  the  right  to  vote,  under  charter  provisions 
which  so  far  modify  the  procedure  of  strictly  stock  corporations 
as  to  constitute  at  least  a substantial  recognition  of  the 
theoretical  advantages  of  the  mutual  idea,  without  at  the  same 
time  involving  a complete  abandonment  of  those  fundamental 
virtues  which  reside  in  the  system  of  stock  ownership.  In  the 

6 


evolution  of  modern  business  the  potentialities  of  such  a plan 
of  organization  as  the  Metropolitan  follows  are  deserving,  I 
think,  of  very  serious  consideration. 

The  administrative  officers  of  the  company,  whose  directors 
are  chosen  in  the  manner  I have  mentioned,  seem  to  me  not 
to  have  approached  their  task  with  any  bias  in  favor  of  stock- 
holders as  against  policy-holders,  or  the  reverse — as  might  very 
well  have  been  the  case  if  one  or  the  other  of  these  elements 
had  been  in  complete  control  of  the  company.  Rather  they 
have  shown  a desire  to  harmonize  the  interests  of  both  elements 
for  the  general  good  of  the  organization.  In  this  they  have 
been  very  successful.  They  have  so  increased  the  assets  of 
the  company  as  to  make  these  equal  the  resources  of  many 
States  and  even  nations.  They  have  at  the  same  time  steadily 
cheapened  the  cost  of  insurance  to  policy-holders,  both  by 
direct  means  and  by  the  distribution  of  bonuses.  They  have 
extended  the  company’s  business  to  such  an  extent  as  to  bring 
it  into  contact  now  with  approximately  one-eighth  of  the 
population  of  the  entire  United  States.  That  this  notable 
growth  has  involved  no  sacrifice  of  efficiency  in  the  handling 
of  administrative  details,  but  on  the  contrary  has  been  the 
direct  result  of  constantly  increasing  efficiency,  is  shown  by  the 
comparatively  small  losses  sustained  by  the  company  in  pro- 
portion to  the  large  investments  made,  by  the  high  earning 
power  of  the  company’s  securities,  and  by  the  steady  decrease 
which  has  been  taking  place  in  the  percentage  of  managerial 
expenses  to  the  company’s  premium  income.  The  fact  that 
the  percentage  of  lapses  due  to  the  abandonment  of  their 
insurance  by  policy-holders  is  constantly  decreasing,  speaks 
eloquently  to  the  same  effect.  This  last-mentioned  develop- 
ment is  perhaps  the  most  convincing  evidence  which  could  be 
offered  that  the  company’s  policy-holders  are,  broadly  speaking, 
very  well  satisfied  indeed  with  what  they  get  in  return  for  the 
premiums  they  pay. 

A very  remarkable  showing,  altogether.  It  is  very  largely 
explained,  it  seems  to  me,  by  the  fact  that  those  in  control  of 
these  great  companies  realize  to-day  that  such  institutions 
must  shoulder  responsibilities  to  the  community  at  large  of 
a somewhat  different  order  from  those  which  confronted  them 
when  they  were  engaged  in  business  in  only  a small  way,  and 
that  the  affairs  of  such  companies  simply  cannot  be  administered 
in  a spirit  which  takes  only  the  business  side  of  things  into 

7 


account.  This  fundamental  change  in  attitude  on  the  part 
of  great  business  institutions  which  have  come  up  from  small 
beginnings  need  not,  it  seems,  be  accompanied  by  any  actual 
changes  in  the  legal  status  or  character  of  such  organizations.  In 
the  case  of  the  Metropolitan  there  have  been  no  vital  changes 
in  the  company’s  corporate  character  for  many  years.  Under 
its  system  of  joint  control  by  stockholders  and  Ordinary  policy- 
holders, it  has  been  able  very  effectively  to  rise  to  the  occasion 
and  to  bring  about  all  the  changes  in  its  methods  of  doing 
business  which  a continuous  growth  has  from  time  to  time 
necessitated.  It  is  difficult  to  see  how,  if  the  burden  of  the 
administration  of  such  institution  as  this  had  during  the  past 
twenty  years  been  upon  the  shoulders  of  the  public,  the  insti- 
tution could  have  been  made  a particle  more  responsive  than 
it  is  to  the  constantly  changing  requirements  of  our  time.  If 
the  men  in  charge  of  such  a company  grow  reactionary  in  their 
tendencies,  or  blind  to  the  social  progress  of  the  age,  the  move- 
ment toward  an  absorption  of  their  powers  by  the  State  itself 
will,  as  matters  stand,  proceed  very  rapidly.  But  in  the  case  of 
the  company  under  consideration  there  has  been  such  a frank 
and  fearless  recognition  of  its  new  responsibilities  that  it  is  easy 
enough,  after  all,  to  understand  how  it  has  happened  that  in  the 
field  of  Industrial  insurance  the  movement  toward  State  opera- 
tion and  ownership  has  experienced  a set-back.  Having  very 
promptly  recognized  what  the  public  may  rightfully  require 
from  institutions  engaged  in  the  Industrial  insurance  business 
— having  in  fact  been  largely  instrumental  in  educating  the 
public  to  a full  realization  of  what  it  might  rightfully  require — 
this  company  waited  for  no  changes  in  existing  law  before 
striking  out  as  a pioneer  among  insurance  companies  along  the 
pathway  of  social  service  on  a huge  scale.  The  report  of  the 
examination  which  has  just  been  completed  shows  the  extent 
and  ramifications  of  these  departures.  The  many  admirable 
things  which  have  been  accomplished  for  policy-holders  and 
employees  during  the  past  decade  are  set  forth  in  considerable 
detail  in  the  following  pages.  Leaving  out  of  consideration 
the  mere  numbers  of  those  who  have  been  directly  benefited 
by  these  activities,  I think  that  the  example  which  the  Metro- 
politan has  set  to  other  great  business  organizations  by  its 
early  recognition  of  the  new  responsibilities  attaching  to  all 
business  enterprises  which  have  attained  a certain  size,  is 
one  of  the  most  beneficial  of  recent  occurrences  in  the  field  of 


8 


American  business.  In  carrying  out  some  of  its  remarkable 
projects  of  social  betterment,  like  the  establishment  of  its 
tuberculosis  sanatorium  for  the  Home  Office  and  Field  employees 
of  the  company,  it  has  had  to  overcome  many  obstacles,  even 
to  the  extent  of  invoking  court  aid  to  enable  it  to  proceed. 
Fortunately  our  court  of  last  resort  in  New  York  was  progressive 
minded  enough  not  to  withhold  its  assistance  in  this  worthy 
enterprise.  The  tuberculosis  sanatorium  is  now  an  accomplished 
fact.  But  for  years  before  this  happened,  the  company  had,  by 
means  of  educational  literature  distributed  on  a gigantic  scale, 
been  waging  effective  warfare  against  the  dread  evil  of  tuber- 
culosis. For  years  it  has  through  its  publications  upon  the 
question  of  health  conservation  been  serving  multitudes  of 
people  as  a sort  of  University  of  beneficial  instruction  upon  this 
most  important  subject.  For  years  it  has  maintained  for  its 
policy-holders  a nursing  service  upon  a great  scale;  this  has 
latterly  become  a veritable  marvel  of  efficiency  and  practical 
helpfulness.  I have  mentioned  only  a few  of  the  things  the 
company  has  been  doing  in  the  field  of  social  service,  but  I 
think  that  these  will  sufficiently  show  the  extent  to  which  this 
institution  has  recognized  the  modern  truth  that  organized 
wealth  under  private  management  must,  if  it  is  going  to  be 
allowed  to  exist  at  all,  assume  certain  public  responsibilities 
which  were  not  dreamed  of  under  any  of  the  old  philosophies. 

Now  as  to  my  purpose  in  dwelling  upon  these  matters  in  a 
memorandum  like  this.  It  is  not,  let  me  hasten  to  say,  primarily 
for  the  purpose  of  praising  the  Metropolitan  Life  Insurance 
Company  or  its  present  management  that  I mention  them.  It 
simply  happens  that  this  great  institution — having  so  very 
recently  been  under  our  critical  scrutiny,  and  presenting  so 
many  admirable  illustrations  of  what  an  efficient  and  en- 
lightened modern  business  organization  on  a large  scale  can  do 
in  the  way  of  keeping  abreast  of  modern  thought — seems  to 
be  in  a position  where  I may  properly  use  it  as  an  illustration 
of  the  particular  point  I had  in  mind  when  I decided  to  prepare 
this  Preface  to  the  Report  of  my  Examiners.  My  point  is,  of 
course,  that  private  initiative  and  enterprise  are  at  their  best 
still  capable  of  doing  the  finest  possible  work  in  fields  from 
which,  latterly,  all  the  talk  has  been  that  these  agencies  should 
be  compelled  to  retire.  Those  of  us  who  have  been  more  or 
less  closely  connected  during  the  past  few  years  with  the  work 
of  the  State  are  in  a position  to  realize  better  perhaps  than 

9 


many  others  are,  the  strength  of  the  tide  that  is  setting  nowa- 
days in  the  direction  of  what  is  commonly  called  Socialism — 
by  which  I mean,  of  course,  the  taking  over  by  the  State  at 
the  earliest  possible  moment  of  nearly  every  form  of  productive 
activity.  We  have  been  in  a position,  too,  where  we  could 
plainly  see  some  of  the  evils  which  creep  very  insidiously  into 
all  public  administration  of  large  and  complicated  affairs. 
Upon  me  the  effect  of  the  experience  has  been  to  make  me 
disinclined  to  see  the  movement  toward  vState  omnipotence 
proceed  a bit  faster  than  it  has  to.  Rather  would  I see  the 
people  pause  every  now  and  then  before  such  an  example  of 
private  enterprise  as  we  are  here  considering,  and  consider 
soberly  whether,  in  the  long  run,  good  is  going  to  come  from 
substituting  political  administration  in  place  of  the  kind  of 
private  administration  which  can  apparently  be  secured  for 
such  companies  nowadays — and  which  can  be  safeguarded,  of 
course,  to  any  extent  the  State  may  desire  by  a system  of 
efficient  governmental  supervision.  The  Metropolitan  Life 
Insurance  Company  is  only  one  of  several  great  insurance 
organisms  of  which  substantially  the  same  things  which  I have 
said  with  particular  reference  to  this  one  company  might  be  said 
generally.  The  Metropolitan  Life  Insurance  Company  is 
by  no  means  a unique  example  among  business  institutions,  or 
even  among  insurance  companies,  of  modern  and  enlightened 
business  management.  Institutions  like  this  constitute  the 
most  effective  barriers  we  have  to-day  against  the  too  rapid 
spread  of  socialistic  ideas;  and  that  is  why,  with  so  shining  an 
example  at  hand,  I — who  believe  in  making  haste  slowly  in 
the  field  of  political  evolution,  even  to  the  extent  of  putting 
on  the  brakes  occasionally — have  not  been  able  to  resist  the 
temptation  of  pointing  specifically  to  it  in  proof  of  what  private 
enterprise  is  capable  of  accomplishing  for  the  public  good  in 


the  insurance  field. 


Superintendent  of  Insurance. 


“Conclusion. 


“This  examination  shows  that  this  Company  is  efficiently 
managed,  that  its  financial  condition  is  good  and  that  its 
reserves  are  ample.  It  promptly  carries  out  its  obligations  to 


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its  policy-holders  in  a liberal  manner.  The  Company  has  a 
first-class  organization.  The  management  and  agency  force 
are  devoted  to  the  welfare  of  the  Company  and  its  policy- 
holders. ^ 

“The  treatment  by  this  Company  of  its  policy-holders  in  the 
prompt  payment  of  their  claims,  in  the  voluntary  payment 
of  millions  of  dollars  in  bonuses,  and  its  social  welfare  work — 
both  in  education  and  in  the  free  nursing  service— are  features 
of  the  Company’s  business  which  deserve  commendation.  'The 
Tuberculosis  Sanatorium  for  the  benefit  of  thousands  of  em- 
ployees of  the  Company,  the  Staff  Savings  Fund,  whereby  it 
encourages  thrift  among  its  employees,  and  other  ways  in  which 
it  cares  for  its  employees,  all  impressed  your  examiners  with 
the  advanced  position  this  Company  has  taken  in  this  class  of 
work.  These  facts,  together  with  the  further  fact  that  all 
policy-holders  of  the  Company  whose  policies  have  been  in 
force  for  one  full  year  are  entitled  to  vote  for  members  of  the 
board  of  directors,  safeguard  the  future  welfare  of  the  organiza- 
tion. 

“Respectfully  submitted, 

“Nelson  B.  Hadley, 

“ Chief  Examiner 


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